Philippa Kaur

“How long is your runway before takeoff?” That is how venture capitalists (vcs) begin meetings in India these days, says Ananth Narayanan, founder of Mensa, one of the country’s newest unicorns (companies worth in excess of $1bn). Until recently the main question that mattered for India’s startup scene was valuation. But the mood has changed. Plunging share prices at companies that have gone public have made vc firms much warier about investing. Prizing unrealistic valuations has given way to worrying about how quickly startups might begin to make money. So far Mensa, which buys stakes in digital brands, is one of a handful of such firms that makes a profit.Listen to this story. Enjoy more audio and podcasts on More

Young people have always perplexed their elders. Today’s youngsters are no different; indeed, they are baffling. They have thin wallets and expensive tastes. They prize convenience and a social conscience. They want their shopping to be at once seamless and personal. They crave authenticity while being constantly immersed in an ersatz digital world. As these youngsters start spending in earnest, brands are trying to understand what these walking paradoxes want and how they shop. The answers will define the next era of consumerism.Their absolute numbers are formidable. The European Union is home to nearly 125m people between the ages of ten (who will become consumers in the next few years) and 34. America has another 110m of these Gen-zs and millennials, a third of the population. The total annual spending of households headed by American Gen-zs and millennials hit $2.7trn in 2021, around 30% of the total. Although they are the group with the least to spend per head today, by 2026 American Gen-zs (those born between 1997 and 2012) may make up the majority of the country’s shoppers.A good place to start dissecting the psyche of the young consumer is to consider the economy that has moulded them. At the older end of the scale, today’s 30-somethings came of age in the midst of the global financial crisis of 2007-09 and the ensuing recession. Their younger peers had a bit more luck, beginning their careers in years when tightening labour markets had pushed up wages. Until, that is, the covid-19 pandemic upended many of their lives.These two big shocks, of the sort that their parents were mostly spared in a more benign economic era between 1990 and the mid-2000s, have fostered pessimism among the young people who experienced them. A study by McKinsey, a consultancy, published in 2022, found that a quarter of Gen-zs doubted they would be able to afford to retire. Less than half believed they would ever own a home. Uncertainty about the future may be encouraging impulsive spending of limited resources in the present. The young were disrupted more by covid than other generations and are now enjoying the rebound. According to McKinsey, American millennials (born between 1980 and the late 1990s) spent 17% more in the year through to March 2022 than they did the year before. Despite a short-term rebound from the dark days of the pandemic, their long-term prospects are less good. American millennials and Gen-zs have accumulated less wealth than Gen-x or Boomers at the same age. Easy access to means of spreading payments may also encourage splashing out. According to another McKinsey survey from October 2022, 45% of Europeans in their teens and early 20s intended to make some kind of splurge in the next three months whereas 83% of baby boomers, born before 1964, said “no” to such profligacy. Forrester, a market-research firm, found that most users of “buy now, pay later” apps are a few years either side of 20. Megan Scott, a 20-year-old student from London, speaks for many of her peers by admitting that, when it comes to shopping, she has no restraint—until, she chuckles, the bill arrives. In many ways youngsters’ shopping habits—like their lives—are defined by the “attention economy”, where buying stuff has been made far easier without a trip to the shops. A proliferation of social media means that there are many new ways of attracting consumers’ eyeballs. Most young shoppers never knew a world without smartphones. More than two-thirds of 18- to 34-year-old Americans spend four hours or more on their devices each day. A heightened expectation of convenience comes with being raised in the age of Airbnb, Amazon and Uber. Young people want their shopping to be totally hiccup-free. The light-speed online world also appears to have lowered tolerances for long delivery times. A study by Salesforce, a business-software giant, found that Gen-z Americans are the likeliest of all age groups to want their groceries delivered within an hour. They are more likely than the rest of the population to use their phones to pay for shopping, according to Forrester, and are put off if the range of payment methods is limited. These “always-on purchasers”, as McKinsey has christened them, often shun a weekly shop for quicker fixes of everything from fashion to furniture. They like subscriptions, frequently favouring shared access to products rather than outright ownership. This has buoyed online-rental sites (like Rent the Runway for fashion) and streaming services. Investors may have fallen out of love with Netflix but Gen-z has not; the company remains one of the most popular brands among that age group in America.The internet has also changed the way the young discover brands. Print, billboard or television advertising has given way to social media. Instagram, part of Meta’s empire, and TikTok, a Chinese-owned video-sharing app, are where the young look for inspiration, particularly for goods where looks matter such as fashion, beauty and sportswear. TikTok’s user-generated videos can propel even tiny brands to speedy viral fame. Such apps are increasingly adding features that allow users to shop without ever leaving the platform. According to McKinsey, by 2021 six in ten Americans under the age of 25 had completed a purchase on a social-media site. Some are following the Chinese model of “social commerce” by mixing live-streamed entertainment with the chance to shop. For the time being, though, young Western consumers prefer to make purchases outside social media, and often scour sites like Amazon for bargains from the brands they have discovered. According to a survey by Cowen, an investment bank, spending on subscriptions to Prime, Amazon’s home delivery and entertainment service, trails only phone bills, food and travel in young people’s shopping baskets. Physical shops are not entirely shunned, as long as the experience feels personal and, ideally, integrates virtual and physical worlds. Nike, for example, is successfully targeting young buyers by allowing them to design their own trainers on its website, to pick up in person after attending an in-store dance class, and then encouraging them to tag the brand in a review on TikTok or Instagram.The new world of shopping has also allowed the young to take a more informed view of the companies that they buy from. The attention economy’s information overload has not dulled youngsters’ senses. On the contrary, it appears to have made them hypersensitive, especially to any brand that pretends to be something it isn’t. Edelman, a public-relations firm, found that seven in ten Gen-zs across six countries fact-check claims made in adverts. Citing survey data that show some teens have stopped using certain brands because of their shady ethics, Forrester has taken to calling young consumers “truth barometers”. Brands that do not match up to the long list of requirements had better watch out. If they do not get what they want and how they want it, youngsters are happy to try something new. According to another McKinsey survey from October 2022, nine in ten Gen-z and millennial Europeans had changed how they shopped, where they shopped or the brands they bought in the previous three months. How the young shop is clearly in flux. What they buy, too, is changing. What older generations consider discretionary, such as wellness and luxury, have become essentials. Self-care is all the rage. On the hunt for clothing that will set them apart, the young are turning to posh brands at an ever more tender age. According to Bain, a consultancy, the average Gen-z shopper makes their first luxury purchase when they are 15; their 30-something counterparts were 19 when they entered the luxury market. Some buy posh items as a hedge, believing that such items can hold value even during tough times. Helpfully, these can now be traded easily on second-hand sales platforms such as Vinted and Vestiaire Collective. More broadly, young consumers profess to be more values-driven than previous generations. Research by Forrester shows that this attitude is even more common among teenagers and 20-somethings than among slightly older counterparts. Some of these values are centred around identity (race, gender and so on). Others stem from things the young care about, such as climate change. kpmg, an accounting firm, found that the Gen-z crowd across 16 countries worry more about climate change and natural disasters than any other generation. According to a survey by Credit Suisse, a bank, the young in emerging markets are more fretful still. Revealed preferences paint a more nuanced picture. On the one hand, Forrester has identified Patagonia, a premium outdoor-clothing brand with a record of green do-goodery, as a Gen-z favourite in the rich world. The young are the most likely of all age groups to try—and stick with—alternative proteins such as oat milk and plant-based meat alternatives. But not at any price. Credit Suisse found that on average, consumers globally will pay an average premium of 9% for more environmentally friendly grub. Young consumers in the rich world are less willing to pay premiums for these alternatives than their counterparts in emerging markets.Youngsters’ appetite for instant gratification is also fuelling some distinctly ungreen consumer habits. The young generation has virtually invented quick commerce, observes Isabelle Allen of kpmg. And that convenience is affordable because it fails to price in all its externalities. The environmental benefits of eating plants rather than meat can be quickly undone if meals are delivered in small batches by a courier on a petrol-powered motorbike. Shein, a Chinese clothes retailer that is the fastest in fast fashion, tops surveys as a Gen-z favourite in the West, despite being criticised for waste; its fashionable garments are cheap enough to throw on once and then throw away. Like everyone else the young are, then, contradictory—because, like everyone else, they are only human. ■ More

Jan 14th 2023

Singapore

Driverless vehicles whizz across five new berths at Tuas Mega Port, which sits on a swathe of largely reclaimed land at the western tip of Singapore. Unmanned cranes loom overhead, circled by camera-fitted drones. The berths are the first of 21 due by 2027. When it is completed in 2040, the complex will be the largest container port on Earth, boasts PSA International, its Singaporean owner.

The trade winds blow east

Worldwide port container throughput, TEUs*, bn

Latin America

Middle East and Africa

North America

Source: Drewry Maritime Research

Tuas is a vision of the future on two fronts. It illustrates how port operators the world over are deploying clever technologies to meet the demand for their services in the face of obstacles to the development of new facilities, from lack of space to environmental concerns. More fundamentally, the city-state’s investment, with construction costs estimated at $15bn, is part of a wave of huge bets by the broader logistics industry on the rising importance of Asia, and South-East Asia in particular. The IMF expects the region’s five largest economies—Indonesia, Malaysia, Singapore, the Philippines and Thailand—to be the fastest-growing bloc in the world by trade volumes between 2022 and 2027. The result is that the map of global commerce and the blueprints for its critical nodes are being simultaneously redrawn.

Across the planet, the expansion of seaports is becoming tougher, notes Jean-Paul Rodrigue, a professor of transport geo­graphy at Hofstra University in Long Island. Space in the right locations is scarce. Critics of development, especially among environmentalists, are not. Last year a big port expansion in Piraeus, Greece, was blocked by courts for failing to provide the right assessment of its environmental impact. One in Veracruz, Mexico, was also stopped on environmental grounds.

One solution is to make existing logistics networks more efficient rather than merely larger. In April PSA finalised its purchase of BDP International, an American freight-forwarder specialising in supply-chain management, for an undisclosed sum (its previous private-equity owner had reportedly been looking for $1.5bn). Over the past two years DP World, an Emirati port operator, has bought two supply-chain specialists: Imperial Logistics, a South African firm, for $890m and Syncreon, an American one, for $1.2bn.

Planned expansion

Container space

Planned expansion

Container space

Maasvlakte port, Rotterdam
Image: Jean-Paul Rodrigue

Streamlining supply chains only gets you so far, however. At some point, new capacity will be needed. One way to achieve it is by reclaiming land from the sea. This requires feats of civil engineering—and is expensive. Singapore’s Maritime and Port Authority spent around $1.8bn on filling in the sea with earth for the first stage of the new Tuas facility. The massive Maasvlakte expansion, the second leg of which opened in 2015, has so far cost the Port of Rotterdam, an enterprise jointly owned by the Dutch state and the city government, around €2.9bn ($3.1bn).

Many ports are too deep for land reclamation to be viable. Some are therefore deciding to build upwards. In conventional set-ups, it is impractical to stack more than six containers on top of each other, and even then tall stacks require boxes to be shuffled around constantly to get hold of the right one. The shuffling can take more time than actually moving containers around the port and onto vessels, says Mathias Dobner, chief executive of BoxBay, a joint venture between DP World and SMS Group, an engineering firm. In BoxBay’s “high-bay” storage system each container sits in an individual rack, where automated cranes can pluck them out individually. In Dubai’s Jebel Ali Port, run by DP World, this allows containers to be stacked 11 high.

An illustration of the “high-bay” container system in operation
Video: BoxBay

If you cannot build out or up, another option is to build elsewhere. That explains the rising popularity of inland “dry ports”, where goods are put in containers ahead of time, ready to be loaded onto ships as they arrive at the pier without needing to be stored for days at the port itself. This also lightens road congestion at the terminals. Around 150km (90 miles) from California’s coast, in the Mojave Desert, Pioneer Partners, an investment firm, has secured land and permits for such a facility, to ease traffic at the hopelessly inefficient ports of Los Angeles and Long Beach.

In 2016 PSA entered a joint venture with Chinese state-owned rail operators to run a network of dry ports in China. Manufacturers load goods onto trains at one of 13 inland rail terminals for transport to the coast. Some of these terminals are rather a long way from any shoreline. Urumqi in Xinjiang province, home to one of them, is farther from the sea than any other city in the world, around 2,400km from the Bay of Bengal. In 2022 the International Finance Corporation, the private-sector arm of the World Bank, signed an agreement with another Singaporean logistics firm, YCH Group, and T&T Group, a Vietnamese conglomerate, to develop a $300m inland container depot in Vinh Phuc, in northern Vietnam. The project, known as Vietnam SuperPort, will begin operations in 2024, providing some welcome relief in a country where exports have risen far more rapidly than inland logistical investments.

All the dry-port development in Asia points to the second force reshaping the ports business: the shift of its centre of gravity eastwards. For decades Asian trade has tended to be one-way. Containers loaded with goods manufactured by the continent’s cheap labour sailed to advanced economies and came back largely empty. In the late 1990s more than 70% of Asian exports by value went to other parts of the world. A quarter of a century on, thanks in part to those trade flows and more complex supply chains, Asian economies have become big markets. Today nearly 60% of Asia’s exports flow within the region.

The logistics industry is, like PSA with Tuas, making a long-term wager that this share will grow. Logistics investments grew everywhere amid the pandemic surge in e-commerce. In Asia they ballooned. CBRE, a property consultancy, forecasts that Asia (including China) will account for 90% of the growth in global online shopping between 2021 and 2026. That will require up to 130m square metres of new logistics real estate.

A boom in investment in warehouses for storage and hubs for distribution and fulfilment in the region is already under way. Last year GLP, a Singaporean investment firm specialising in logistics real estate, announced a $1.1bn fund focusing on Vietnam and a $3.7bn one focused on Japan. Its sixth China fund, worth $1bn, closed in early November. India is likely to get a boost as global manufacturers look to diversify their production away from China. The ports business of India’s richest tycoon, Gautam Adani, operates Mundra Port in Gujarat, the country’s largest, and 12 other ports and terminals across seven Indian states. Their combined annual cargo volumes have surged from 200m tonnes three years ago to 300m in 2022. Mr Adani is aiming for 500m tonnes by 2025.

The construction of Mundra Port, Gujarat
Video: NASA Landsat; Google Earth Engine

Investments by shipping giants are pointing in the same eastward direction. In ­October, while global shipping rates were plunging as the effects of pandemic-era bottlenecks eased, Mediterranean Shipping Company (MSC), the world’s biggest by total capacity, announced five new ­intra-Asian services. Three months earlier MSC had announced a $6bn joint venture with the government of Ho Chi Minh City to build a port there by 2027. It will be Vietnam’s largest port on completion. In ­August A.P. Moller-Maersk, msc’s biggest rival, completed the $3.6bn purchase of LF Logistics, a Hong Kong-based firm focusing on intra-Asian trade. The deal brought 223 warehouses and 10,000 employees across the continent under the Danish shipping giant’s banner, with an explicit focus on Asian consumers.

When seaborne trade boomed last century, investments in logistics reflected shifts in the global patterns of production and consumption. They are doing so again. And this time the future looks leaner, smarter—and more eastern. ■ More

Pricey automobiles are impressive on paper and on the road. For their makers, they also often leave a good impression on the income statement. Global car sales in 2022, at around 79m vehicles, are below the level of a decade ago. Yet demand for fancier sets of wheels costing more than €100,000 ($107,000) grew by around 6.5% a year over the same period, according to Bernstein, a broker.Listen to this story. Enjoy more audio and podcasts on More

Peter Bokelmann has had a busy few months. The chief counsel at Trumpf, a maker of machine tools, oversees the firm’s efforts to comply with the new law on the due diligence of supply chains that came into force on January 1st. Mr Bokelmann has been at it since the law was passed in mid-2021. “The enormous effort needed is underestimated,” he sighs. Listen to this story. Enjoy more audio and podcasts on More

Academics do not contend to write the most entertaining research paper of the year. But Yu Tse Heng, now at the University of Virginia, Christopher Barnes of the University of Washington and Kai Chi Yam of the National University of Singapore should take a bow nonetheless. In a study published in 2022, the trio tested the widespread notion that cannabis increases creativity.Listen to this story. Enjoy more audio and podcasts on More

Most in-flight horror stories, of which passengers everywhere experience too many, elicit a scripted apology from the airline or its chief executive. Then it is back to business; aggrieved travellers are left to stew. An incident in November on an Air India flight from New York to Delhi is playing out differently. On January 11th a court in the Indian capital heard a case of a 34-year-old man arrested for urinating while intoxicated on a 72-year-old female fellow business-class passenger. The man blamed the act on alcohol and told the court he had no memory of it when the cabin crew woke him and asked him to apologise, which he did. His bail request was nevertheless denied. Listen to this story. Enjoy more audio and podcasts on More

For more than 140 years John Davis’s family has owned the Pecan Spring Ranch on the prairie lands of West Texas. He has a photo of his great-great-grandmother, known as “the sheep queen of Texas”, sitting in a horse-drawn carriage beneath a tree that still stands in front of the hay barn. It’s a tough business to maintain, even with a valuable herd of Wagyu beef cattle to raise. Yet when a renewable-energy developer offered Mr Davis a large payment to put wind turbines on his land, at first the staunch Republican—and former state congressman—turned it down.Listen to this story. Enjoy more audio and podcasts on More